By Olatunde Cole
The collection and administration of Value Added Tax (VAT) in Nigeria was until very recently a settled issue as taxpayers were left in no doubt as to the need to remit same to the Federal Inland Revenue Service (FIRS). However, two recent decisions of the Federal High Court appear to have thrown a spanner in the works. The court in Attorney General of Rivers State v F.I.R.S declared the unconstitutionality of the Value Added Tax Act. According to the court, the legislative competence of the National Assembly is limited to the taxation of stamp duties, incomes, profits and capital gains as prescribed by Items 58 and 59 of the Exclusive Legislative list (ELL) of the 1999 Constitution of the Federal Republic of Nigeria (as amended) and VAT is residual, hence within the remit of the State House of Assembly. This came on the heels of the decision in Emmanuel Ukala v F.I.R.S where the court held that there was no constitutional basis for the collection of VAT, Withholding Tax, Education Tax, Technology levy or any other levy other than those specifically mentioned in Items 58 and 59 of the Exclusive Legislative list by the F.I.R.S. Interestingly, the Supreme Court had in Attorney General of Lagos v Eko Hotels Limited held that the VAT Act had “covered the field” which the Lagos State Sales Tax Law purports to cover and must prevail over the latter by virtue of Section 4(5) of the CFRN 1999. This piece considers the propriety or otherwise of this decision, any likely conflict with the Supreme Court case and its groundbreaking implications on taxpayers and the overarching demand for fiscal federalism. It is pertinent to point out that this writer does not concern himself with the practicability or otherwise of the collection of VAT by State Governments. The sole concern here is the validity of the decision from a constitutional standpoint.
In A.G. Rivers State v F.I.R.S, the Plaintiff took out an originating summons against the Defendants at the Federal High Court, seeking the interpretation and determination of the following questions:
- Interpretation of Items 58 and 59 of Part I of the Second Schedule to the Constitution of the Federal Republic of Nigeria, 1999 (as amended) (the Constitution) in line with the residual powers of the states as stated in Section 4(7) of the Constitution.
- Upon proper interpretation of Items 58 and 59 as stated above and Item 7 (a) and (b) of Part II of the Second Schedule to the Constitution, whether the National Assembly had the legislative competence to enact on sales tax or VAT or any such levy.
- Upon proper interpretation of issues 1 and 2 above, whether the Taxes and Levies (Approved Collection List) Act is not unconstitutional to the extent that it legislates on matters such as VAT, withholding tax, education tax and capital gains tax to a non-resident of the Federal Capital Territory (FCT), amongst others.
The Court agreed with the plaintiff on all questions, holding that the powers of the National Assembly to make tax laws is limited to taxation of profit, income and capital gains only and the provisions of the F.I.R.S (Establishment) Act, Value Added Tax Act, Taxes and Levies (Approved List for Collection) Act, amongst others are null and void to the extent that they provide for taxes not mentioned in Items 58 and 59 of the Exclusive Legislative List.
A PEEK FROM THE CONSTITUTIONAL LENS
Federalism entails the constitutional division of powers between the central government and component units, such that neither the central nor the regional governments are subordinate to each other, but rather the two are coordinate and independent. The CFRN 1999 clearly demarcates the legislative powers of the Federal Government and the 36 states of the Federation. Section 4 imbues the National Assembly with powers to make laws in respect of any matter contained in the Exclusive legislative list (to the exclusion of the Houses of Assembly of States) and the Concurrent legislative list. The State Houses of Assembly on the other hand are empowered to make laws in respect of matters contained in the Concurrent legislative list. Section 4(5) of the Constitution however makes it clear that where any law made by a State House of Assembly is inconsistent with any law validly made by the National Assembly, the law made by the National Assembly shall prevail and the other law made by the State House of Assembly shall, to the extent of its inconsistency, be void. The State Houses of Assembly are also empowered to make laws in respect in matters neither in the Exclusive nor Concurrent list (residual matters). The residual powers of the states, which are exercisable to the exclusion of the National Assembly, have been recognized by the Supreme Court in a plethora of cases. Thus, the vires to legislate on any such matter lies with the House of Assembly of a State. With particular regard to the powers of the National Assembly to make laws on tax, a careful perusal of Items 58 and 59 of the ELL indicates the limitation of those powers to Stamp Duties, Incomes, Profits and Capital gains. Although, it may be argued that Item 68 of the ELL empowers the National Assembly to legislate on matters incidental or supplementary to those on the list and VAT is closely knitted to these supplementary powers, the logical and reasonable conclusion to draw is the residuary nature of VAT. Any attempt to imply the power of the National Assembly to legislate on VAT will be superficial and perfunctory at best. Apposite here is the ‘expressio unius est exclusio alterius’ rule of interpretation. The express mention of one thing in a statutory or constitutional provision excludes any other which otherwise would have been included. The omission of VAT from the Exclusive and Concurrent legislatives lists precludes the National Assembly from making any law on it. More importantly, the law does not allow for presumption and intendment and there is no equity in taxation. 
CONFLICT WITH EKO HOTEL’S CASE?
In December 2017, the Supreme Court of Nigeria had in the case of Attorney General of Lagos State v Eko Hotels Ltd validated the powers of the Federal Government to impose and Collect VAT. Here, the 1st respondent had commenced a suit against the appellant and 2nd respondent at the Federal High Court in the nature of interpleader proceedings. By an originating summons, the 1st respondent sought a determination by the trial court as to whether remittance of money collected as tax by it from its consumers should be paid to the Federal Board of Inland Revenue (F.B.I.R) or to the Lagos State Government having regard to the provisions of the Value Added Tax Act 1993 and the Sales Tax Law of Lagos State 1995 respectively. The trial court found in favor of the F.B.I.R. Dissatisfied with the decision, the Appellant appealed to the Court of Appeal which in a considered judgment dismissed the appeal and affirmed the judgment of the trial court. Upon further appeal to the Supreme Court, the appeal was similarly dismissed and the Supreme Court held that the Value Added Tax Act that had provided for the very tax the State Sales Tax Law provides, “covers the field”, putting the latter in abeyance and operative. The Court further held that the Value Added Tax Decree No. 102 of 1993 was promulgated by the Federal Military Government and remained in effect, with necessary amendments, until the coming into effect of the 1999 Constitution and by virtue of Section 315 of the 1999 Constitution, it became an existing law, continuing to have effect with such modification as may be necessary to bring it into conformity with the provisions of the Constitution and is deemed to be an Act of the National Assembly to the effect that it is a law with respect to any matter on which the National Assembly is empowered by the Constitution to make laws.
The relevant question here is whether the decision of the Federal High Court in A.G. Rivers State v F.I.R.S is in conflict or at variance with the apex court’s decision in A.G. Lagos State v Eko Hotels Ltd. The answer to the foregoing is an emphatic NO! It is trite that cases are only authorities for what they specifically decide and nothing more. The doctrine of Stare decisis makes it mandatory for lower courts to follow earlier decisions of a higher court where the same points arise in litigation (italics added for emphasis). In Eko Hotels’ case, the issue before the court was not the constitutionality of the VAT Act or the legislative competence of the National Assembly to have enacted same. In fact, Kekere-Ekun J.S.C. made it abundantly clear in her lead judgment where she stated:
“It is necessary to reiterate here that the issue in dispute in this case is not the constitutionality of the Value Added Tax Act. I am of the considered view that the only issue the court needed to determine was whether, as the law stood at the time the cause of action arose, the money already collected by the plaintiff under the VAT Act should be remitted to the 2nd respondent rather than the appellant. In this instant appeal, there is no issue seeking an invalidation of the VAT Act. ”
At the risk of sounding repetitive, this writer humbly submits that the decision of the Federal High Court does not conflict with the Supreme Court’s decision in Eko Hotel’s case as both cases can be distinguished.
TAXPAYERS AND NIGERIA’S PSEUDO-FEDERALISM
Over the past few years, ‘restructuring’ has been the buzzword in conversations on national politics. Whilst restructuring means different things for different people, these calls are on a general note, not misplaced. Nigeria prides itself as a Federal State but the irony lies in the over-concentration of government powers in the Federal Government. The Exclusive Legislative list is made up of 68 different items, whereas the Concurrent list comprises a paltry 30 items. Many states depend on the monthly statutory allocation for survival. Although, VAT as presently collected by the F.I.R.S is shared between the Federal, State and Local Government at the rate of 15%, 50% and 35% respectively, the decision of the Federal High Court is a much welcome development as it enables states develop at their peculiar pace by exploring and exploiting their capacity and potential to generate revenue internally. The flipside however lies in the potential implication of the decision for taxpayers. They are left in a quandary as to who is entitled to VAT. It becomes more worrisome when one considers the penchant of government agencies, particularly the F.I.R.S to flagrantly disregard validly issued court orders. For context, in 2019, the Federal High Court in The Registered Trustees of Hotel Owners and Managers Association of Lagos v A.G. Lagos validated the 5% consumption tax charged on goods purchased and services rendered in Hotels and Restaurants pursuant to the Hotel Occupancy and Restaurants Consumption Law of Lagos and nullified the provisions of the Value Added Tax Act that purported to impose and collect VAT in respect of the same goods and services. The court further granted a perpetual injunction restraining the F.I.R.S from implementing the provisions of the VAT Act in relation to the supply of goods and services consumed in hotels, restaurants and event centers in Lagos State. This decision is presently on appeal and is yet to be set aside. Sadly, the F.I.R.S continues to impose and collect VAT on these same items and the taxpayers are forced to pay an additional 5% consumption tax across the state.
It is not yet “uhuru” for the States as the last of the matter has not been heard. The F.I.R.S has filed an appeal at the Court of Appeal and equally sought an application to stay execution of the judgment. The Federal High Court refused the application and it is expected that the F.I.R.S will bring a similar application before the appellate court. While at that, Rivers State has enacted its Value Added Tax Law and Lagos state is reportedly in the process of following suit. Unless and until the Supreme Court lays the matter to a final and definitive rest, the jury is still out on the constitutionality of the Value Added Tax Act. While we await the decision of the Court of Appeal and ultimately the apex court, we must recognize the decision of the Federal High Court as representing the current position of the law.
Olatunde is a graduate of Law from the Lagos State University, Ojo. He can be reached on 08103254603.
 (2021) 56 TLRN 1
 (2018) 7 NWLR (Pt. 1619) 518
 Wheare, Kenneth (1963), Federal Government, 4th ed., London: Oxford University Press.
 A.G Abia v A.G Federation (2006) 16 NWLR (Pt. 1005) 265; A.G Lagos v A.G Federation (2013) 16 NWLR (Pt. 1380) 249; CIL Risk and Asse Management Ltd. v Ekiti State Government (2020) 12 NWLR (Pt. 1738) 203
 P.D.P v I.N.E.C (1999) 11 NWWLR (Pt. 626) 200; Buhari v Yusuf (2003) 14 NWLR (Pt. 841) 446; Opia v I.N.E.C (2014) 7 NWLR (Pt. 1407) 431.
 Cape Brady Syndicate v Inland Revenue Commissioners (1921) 1 K.B 64; Federal Board of Inland Revenue v Omotosho (1973) N. Comm. L.R. 369
 Emeka v Okadigbo (2012) 18 NWLR (Pt.1331) 55; Ardo v Nyako (2014) 10 NWLR (Pt. 1416) 591.
 At P. 545
 Section 40 of the VAT Act
 Unreported judgment delivered by Hon. Justice Aikawa of the FHC on October 3, 2019 in Suit No: FHC/L/CS/360/2018
 VAT Judgment: Court refuses FG’s plea for stay of execution. https://www.thisdaylive.com/index.php/2021/09/07/vat-judgment-court-refuses-fgs-plea-for-stay-of-execution/